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The Contributions of Knapp and Innes to the Chartalist Theory of Money

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  • Guidorzzi Girotto, Vitor
  • Strachman, Eduardo

Abstract

The relationship between money and credit is analyzed differently between schools of economic thought. Orthodoxy, in general, analyzes it using the commodity money approach; heterodoxy, in large part, adopts the Chartist approach. The crucial difference between them lies in the fact, as put by Schumpeter, that orthodoxy postulates a monetary theory of credit; the heterodox, a credit theory of money. For the latter, money is, by nature, credit, and it can take different forms, tangible or not. The State uses it sovereignty to delimit the monetary system by defining what will (or will not) be accepted as money in the payments of transactions due to itself. Thus, Knapp’s contribution in structuring a theory of state money meets Innes’s credit theory of money and, together, these contributions offer a solid theoretical and historical framework for the formulation of an alternative theory of money, the Chartist theory.

Suggested Citation

  • Guidorzzi Girotto, Vitor & Strachman, Eduardo, 2024. "The Contributions of Knapp and Innes to the Chartalist Theory of Money," MPRA Paper 119866, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:119866
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    References listed on IDEAS

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    1. Knapp, Georg Friedrich, 1924. "The State Theory of Money," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number knapp1924.
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    5. L. Randall Wray, 2014. "From the State Theory of Money to Modern Money Theory: An Alternative to Economic Orthodoxy," Economics Working Paper Archive wp_792, Levy Economics Institute.
    6. David Dequech, 2013. "Is money a convention and/or a creature of the state? the convention of acceptability, the state, contracts, and taxes," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 36(2), pages 251-274.
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    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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